Key Question About People Insured by ACA: Did They Know What They Bought?

As the dust settles from the first round of sign-ups through the federal health insurance marketplace, a new report raises an unexpected question: Did New Jersey residents who enrolled through the Affordable Care Act even know what they were buying?

A Rutgers Center for State Health Policy analysis completed in December and released yesterday found that a lower percentage of New Jersey residents were confident they understood basic insurance terms like “deductible,” “premium” and “provider network” than other people in the Northeast and the nation.

For example, 71 percent of New Jersey residents said they were “very” or “somewhat” confident that they understood what a deductible is (it’s the annual amount a person must pay out-of-pocket for medical services before their insurance covers costs), while 81.1 percent of Northeast residents and 77.1 percent across the country expressed confidence in their understanding of the term.

Center Director Joel Cantor said the survey results indicate that many of the 161,775 residentswho bought plans through the marketplace may not have been aware of what services their plans would cover.

“I worry that it means that they don’t fully understand what they’re buying and that when it comes time to using their insurance, they may have unnecessary surprises,” Cantor said. The Health Reform Monitoring Survey for New Jersey is funded by the Robert Wood Johnson Foundation and conducted by the Urban Institute.

Plans purchased through the marketplace were offered at four different levels of coverage. Platinum plan members must cover 10 percent of costs out-of-pocket; gold plan members, 20 percent; silver plan members, 30 percent; and bronze plan members, 40 percent. The lower the out-of-pocket costs, the more people must pay in monthly premiums.

Out-of-pocket costs were limited for people with incomes below 250 percent of the federal poverty line, currently amounting to $28,725 for a single person and $58,875 for a family of four. Those above that level may have to pay up to $6,350 per individual or $12,700 per family in out-of-pocket costs.

“We know that a lot of products on the marketplace had very substantial cost sharing, and it’s important that people understand what that means when they do go to seek care,” Cantor said.

Cantor said some people might have been unaware of health insurance terminology because they were new to health insurance, but others should have been exposed to some terms when they were insured previously.

“Many of them would have been uninsured and probably had little experience with any of these terms -- others would have been in the individual market prior to the change and some of those plans have substantial deductibles,” Cantor said.

Leading insurance industry advocate Wardell Sanders, president of the New Jersey Association of Health Plans, said it was unexpected that the state’s residents had a less-confident grasp of insurance terms than those in other states.

“I’m not surprised that there’s a need for healthcare literacy and health insurance literacy, but I’m not sure I can put my finger on why New Jersey” would do worse than similar states, Sanders said.

Sanders said insurance products sold in the state are similar to those in other states and that the share of state residents who have been uninsured has been similar to the national average.

“Those concepts have been around for a long time,” he said.

But Sanders said the report underscored a larger point.

“There is a need for healthcare literacy and health insurance literacy and probably there’s a responsibility for a lot of different stakeholders to try” to increase that literacy, Sanders said.

He noted that both the federal government and private nonprofits have worked to promote knowledge of health insurance over the past year.

“It’s a challenge, particularly for the folks who haven’t had insurance, to understand these concepts and terms so that they’re not surprised” when they seek to use their insurance, he said.

Insurance brokers, insurance companies and those who help people apply for insurance can also play a role, Sanders suggested. He added that health insurance concepts could be made an important part of the financial literacy curriculum used in some high schools.

Sanders added that even people who pay out-of-pocket costs still gain a significant benefit from having insurance, since insurers negotiate significantly lower bills with providers. People without that bargaining power are subject to higher bills.

Cantor agreed that different groups could play an important part in informing the public about insurance. He noted that the certified application counselors, navigators and others who help people apply for marketplace insurance could play an important role. The next marketplace open enrollment period begins on November 15.

While New Jersey residents were less confident about insurance terminology, there were more confident than those in other parts of the country that they would benefit from the ongoing changes to health insurance this year.

While 18.3 percent of New Jersey survey respondents said they anticipate having better options for obtaining health coverage this year, only 10.1 percent of Northeast residents and 11.7 percent nationally held the same view. The same relative optimism held true for anticipating better protection against high medical bills; quality of care; premium costs; choice of providers; ability to get well in a timely way, and out-of-pocket costs.

Cantor said the reason for New Jerseyans’ optimism wasn’t clear. He noted that it didn’t appear to reflect political differences, since every northeastern state voted for President Barack Obama.

“That’s not our stereotype,” Cantor said of New Jersey’s unexpected optimism. “But who knows?”